INTERGENERATIONAL WEALTH TRANSFER

Transcription

1 INTERGENERATIONAL WEALTH TRANSFER Tania Rossouw Certified Financial Planning Professional

2 RETIREMENT.. 1

3 WHAT? The efficient transfer of your assets/wealth to your family/chosen heirs in the event of death Strategies will vary greatly from family to family How much is enough?; Finding the balance between family and supporting charity 2

4 WHY ARE WEALTH TRANSFERS UNSUCCESSFUL? Communication break down Failure to prepare heirs Lack of an agreed-upon mission for the family wealth Must be proactive now and NOT wait until death Implement a process to promote family values Family structures have become complicated trend to include successive generations Family Businesses complexities. Build an enduring family legacy. 3

5 WHY ARE WEALTH TRANSFERS UNSUCCESSFUL? Emigration BUT family assets are in SA Estate planning not considered Issues around Will, or the absence of a will Specialised Structuring may be required E.g. Trusts, protection of assets Living will illness, mental incapacity 4

6 HOW TO PROMOTE FAMILY VALUES AND PROVIDE A GOOD BASE FOR INTERGENERATIONAL WEALTH TRANSFER Define your family history and values Timing. Involve family in wealth planning Share the message how much is enough Have a transfer strategy On-going. Intergenerational Wealth planning is a process, not an event Most people don t plan to fail, they fail to plan John L. Beckley 5

7 The entirety of adult life is a series of personal choices, decisions. If we can accept this totally, we become free people. If we don t accept it, we will forever feel victims. The Road Less Travelled, M Scott Peck 6 7

8 ESTATE PLAN CONSIDERATIONS What is an estate plan? Not just to avoid paying estate duty! Provides the framework to the transfer of rights Structuring your assets (includes property) Ensuring that the estate can be finalised quickly and easily avoiding time delay for beneficiaries Ensuring that the assets may be transferred, free from liabilities E.g. properties Liquidity is a key consideration of effective estate planning Being able to give effect to the will is key 7

9 THE ESTATE DUTY CALCULATION Determine the value of the estate at death RXXXX Determine the amounts to be included as deemed property RXXXX = Gross value of the estate RXXXX LESS Determine the deductions in terms of S4 (Estate duty Act) RXXXX 8 - funeral costs (S4a) - Liabilities (S4b) - Admin costs (S4c) - Expenditure in relation to Estate Duty (S4d) - Foreign property (S4e) - Debts due outside SA (S4f) - Limited interest reverting to a donor (S4g) e.g. usufruct - Bequests to a public benefit organisation (S4h) - Improvements to property (S4i) by beneficiary - Interest in property improved by usufructory (S4j) - Claims in terms of the Matrimonial Property Act (S4ia) - Limited interest created by a predeceased spouse (S4m) - The valuation of unlisted shares (S4p) - Amounts payable to a surviving spouse (S4q)

10 THE ESTATE DUTY CALCULATION - CONTINUED = Net value of the estate RXXXX Less The S4A Abatement R 3.5 m = Dutiable 20% estate duty RXXXX Note: Insuring there is sufficient liquid assets available to settle the required amounts payable in terms of the estate duty calculation is a vital component of a successful transfer of assets from one generation to another 9

11 WHAT ARE THE BASICS OF A WILL A written document Signed by 2 competent witnesses (not beneficiaries) Signed by the testator/testatrix In each others presence Dated Clearly identified Testator/Testatrix (ID number) Clearly defined beneficiaries (who gets what) Clearly defined assets to be distributed Nominated executor Agreed fees and security if required Don t rule from the grave - should be realistic 10

12 NO VALID WILL INTESTATE SUCCESSION WILL APPLY Intestate Succession Act sets out the rules To contest intestate succession, litigation is required Master of the High Court will appoint an executor Full fees are payable to the appointed executor (3.5% and 6%) Assets are sold and distributed Process is long and drawn out emotional trauma for the family 11

13 INHERITANCE OR PROBLEM The DO s and DON TS of a successful succession plan: - DO keep it simple consult a professional for advice - DO NOT rule from the grave unrealistic requirements before transfer it to take place e.g. Jan must divorce Anne or when Sarah passes her masters degree - Preferably DO NOT leave undividable assets to more than one beneficiary e.g. Jewellery, car, farm - AVOID Illegal requirements. - DO NOT over complicate the beneficiary nominations 12

14 TRUST CREATION AND CONSIDERATIONS Will Trust (Testamentary) OR Inter Vivos (Discretionary) Trust Advantages: Extremely flexible Efficient taxation - Assets owed by trust not subject to estate duty, capital gains tax and executors fees Protection of Assets Creation of flexible succession arrangements Controlled distributions for beneficiaries Disadvantages: Costs on going administration and complexity Transfer of assets could incur taxes and costs Higher tax rates apply Risk of the trust being regarded as a sham, lose asset protection Must have expert and independent advice 13

15 STRUCTURING YOUR ESTATE AND ASSETS Scenario 1: Pre death transfer through donations prior to death parent Wife Estate Brother Child Notes: - Donations tax, Transfer Duty - Not a generational solution - Purpose can be lost 14

16 STRUCTURING YOUR ESTATE AND ASSETS Scenario 2: divesting your assets prior to death to a trust or other perpetual structure Business Trust Family trust Property Estate 15

17 CONCLUSION Useful points: 1. Plan for death with an estate plan 2. Worry about liquidity first and amount estate duty last 3. Make sure you have a valid will 4. Keep It Simple Silly leave a legacy not a nightmare 5. Let regulations be the problem of beneficiaries not executors 6. Get help from a Professional Financial planner, Family Advisor and/or Fiduciary Specialist 16

18 QUESTIONS? 17

19 THANK YOU Old Mutual is a licensed Financial Service Provider